Top 12 tax havens for US companies

US corporations are making record profits in tax havens like Bermuda, the Cayman Islands, and the British Virgin Islands (BVI). Some of the profits exceed the GDP of the host country, with Bermuda’s offshore profits 1643% of total economic output.

As a share of Gross Domestic Product (GDP), profits from
subsidiary US companies operating in the Netherlands are more
than 100 percent of the country’s annual economic output,
according to a new study by Citizens for Tax Justice, published Tuesday.

In Bermuda, US companies reported $94 billion in profit, but the
island’s GDP is only $6 billion.
The report draws on data collected by the US International
Revenue Service from subsidiaries reporting profits outside of
the US in 2010.

“Clearly, American corporations are using various tax
gimmicks to shift profits actually earned in the US and other
countries where they actually do business into their subsidiaries
in these tiny countries,” the report says.

US companies filed the largest profits in the Netherlands,
Bermuda, Ireland, Luxembourg, the Cayman Islands, Switzerland,
Singapore, the Bahamas, the British Virgin Islands, Cyprus, the
Netherlands Antilles, and Barbados. But none of these finances
are factored into the GDP of the host countries.

When filing US income taxes, a foreign corporation is defined if
its US shareholders control more than 50 percent of the
outstanding voting stock.

Offshore wealth –money that is kept abroad for tax purposes- is a
popular tactic for American companies to avoid paying high taxes
in the US. Google, Apple, and other hi-tech companies have all
been accused of “sheltering” money abroad and not
contributing enough to the American tax system, which is their
main market.

Many US companies use a loophole called “repatriation”
in order to delay paying the US government taxes. Under US tax
law, companies with offshore subsidiaries can wait until their
company is “repatriated”, or returned to the US, until they pay
taxes. This tool encourages US companies to report profits
outside of the US, where they are safe from high taxes.

Other countries can offer very attractive corporate tax rates
compared to the required 40 percent in America. Bermuda, the
Cayman Islands, and the Bahamas for example, have a rate of 0
percent.

Ireland has a corporate tax rate of 12.5 percent, Switzerland
17.92 percent, and Luxembourg a local rate of 29.22 percent,
according to
data from KMPG Global.

The only country where companies pay more taxes than in America
is in the United Arab Emirates, which has a 55 percent corporate
tax rate.

Countries, or tax havens, can provide opportunities for investors
by lowering their corporate tax rates as well as income tax
rates.

Low income tax rates can make investment more competitive and
business climate more attractive for some investors looking for
loopholes. An estimate by Boston Consulting Group pegs offshore
wealth at $8.5 trillion. Other independent estimates peg it as
high as $20 trillion.

With the G20 and OECD countries focused on curbing tax evasion
and avoidance, several Caribbean countries – Bermuda, Barbados
and Cayman Islands – would be subject to a tightening tax noose.
These countries could face a deceleration in economic activity if
international tax structures are to be dismantled.